Malawi Paid $5 Million for Drought Insurance. The Model Was Watching a Crop the Farmers Had Stopped Planting.
In April 2016, the government of Malawi declared a national emergency. The rains had failed across southern Africa for the second year running, and 6.7 million Malawians were food-insecure, unable to feed themselves until the next harvest. This was the scenario Malawi had insured against. For the 2015/16 season, the government had paid almost US$5 million for a sovereign drought policy from ARC…
In April 2016, Malawi's government declared a national emergency due to consecutive years of failed rains, leaving 6.7 million Malawians food-insecure. To protect against this risk, the government paid almost $5 million for a sovereign drought policy from ARC Ltd, the insurance affiliate of the African Risk Capacity. The policy was parametric, meaning it used satellite rainfall estimates to trigger payouts based on crop models without the need for on-ground loss assessments.
However, the model was monitoring a long-cycle maize crop that most Malawian farmers had stopped planting, which led to an incorrect assessment of the drought's impact. The evaluation found that the calibration process neglected adequate input from agronomists, agro-meteorologists, and other expert stakeholders, and was too removed from the ground.
Despite ground-truthing exercises revealing discrepancies between the model and reality, the findings were not made public. The $5 million policy resulted in no payout, as the crop that wasn't planted was not counted as a loss. After public outcry and months of dispute, ARC agreed to pay $8.1 million to Malawi in January 2017, nine months after the emergency declaration.
Written by urgent.news from Dev.to's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
